Sunny Freeman, The Canadian Press, On Tuesday August 23, 2011, 8:01 pm EDT
By Sunny Freeman, The Canadian Press
TORONTO - Royal Bank of Canada (TSX:RY) is raising its variable rate mortgages for homebuyers in a move that reflects higher costs of borrowing in the bond market.
Canada's largest bank said Tuesday it is hiking the rates charged on its five-year variable closed mortgages by a fifth of a point, effective Wednesday.
That will put that rate even with the bank's prime rate of three per cent.
Bank of Montreal later joined Royal in raising its five-year variable closed mortgage to three per cent which, in the case of BMO, represented a 0.15 percentage point increase.
Meanwhile, the Royal's special variable rate mortgage also increased by a fifth of a point to prime minus 0.45 percentage points, making it 2.55 per cent.
In the past when banks raised variable rates without a corresponding increase in the Bank of Canada rate, they were accused of trying to boost profit margins at the expense of borrowers.
But Royal Bank, which is also Canada's largest mortgage lender, said the latest increase reflects higher costs in the bond market, where it raises money to finance its mortgage loans.
Bond interest rates have risen due to growing debt fears in the United States and Europe as lenders want higher rates to part with their money in a riskier global economy.
The increase in market interest rates comes at the same time central banks are keeping their rates low to stimulate the weak economy.
In the U.S., the Federal Reserve Board has said it will keep interest rates flat for another two years to spur growth, while the Bank of Canada is also expected to hold the line on rates well into next year.
Low mortgage rates in recent years have been a big factor in spurring growth in the Canadian housing market, which remains buoyant in most parts of the country.
Although it is unusual for banks to hike their variable rates without a rise in the Bank of Canada's overnight lending rate, it is not unprecedented.
"This is not the first time that the price for variable rate mortgages is changing relative to prime without a corresponding change in the BOC rate," a Royal Bank spokesman said in an email.
"In fact, over the period that BOC increased its overnight rate from 0.25 per cent to one per cent, the bank reduced the pricing levels for new mortgages relative to prime."
The mortgage market is highly competitive in Canada and in the past variable rate mortgages were popular with borrowers when interest rates were expected to remain low and there was little chance of sudden hikes in borrowing costs.
In the last few months, more consumers opted to lock into fixed terms when it looked like the Bank of Canada would begin to push rates sharply higher to fight inflationary pressures in the economy.
But the recent stock market and economic turmoil that has kept central bank rates low could push borrowers back to variable terms in the Canadian market.
Royal Bank said the Bank of Canada's rate is just one of many factors that go into pricing decisions. Banks mortgage costs are also based on changes in the bond markets, where rates have been volatile and banks raise money for their mortgage lending.
Recent global uncertainty over whether the U.S. can come up with a plan to deal with its debt problems, and over fears the debt crises in smaller European economies will spread across the continent, have caused bond rates to rise.
That makes it more expensive for banks to fund their mortgage operations, and led RBC to recoup some of those costs through a higher variable rate.
"Mortgage rates are tied to the banks funding costs which change from day to day," the bank said. "Due to global economic concerns, the funding costs for banks have been increasing.
"While we have held off in passing on these high costs to our clients, it is now necessary for us to increase this mortgage rate."
The big Canadian banks usually move in tandem when there is a variable rate change along with a change in the Bank of Canada's overnight lending rate, but its unclear whether the rest will follow this time.
Competitive pressures could force some banks to keep variable rates low to attract customers.
Royal Bank will report its third-quarter results on Friday.
Wednesday, August 24, 2011
Monday, August 15, 2011
Shall I rent or shall I own?
Mark Wahlberg buys a Toronto condo despite real estate bubble
Golden Girl Finance, On Thursday August 11, 2011, 10:00 am EDT
Donnie Wahlberg may have been a New Kid on The Block, but his cutie-boy brother Mark Wahlberg, (Marky Mark to those who remember the 90s) has become a new kid on a block in Toronto…in the form of a $12 million penthouse condo. The posh bachelor pad is close to Wahlberg's usual digs at The Hazelton Hotel, where rooms run between $500 to $2400 a night. Given that the star of Boogie Nights, The Fighter and former leader of hip-hop group The Funky Bunch spends an increasing amount of time filming movies in the city and hanging out at the Toronto International Film Festival, it seems he's decided to quit forking over money in hotel room rentals and instead buy his own place.
Wahlberg probably has the advantage of owning his new condo outright, giving him full equity ownership. For the rest of us mortgage-carrying mortals, however, now is not an ideal time to be investing in a condo in Toronto. According to Ben Rabidoux, financial adviser, real estate expert and author of the website The Economic Analyst (www.TheEconomicAnalyst.com), in most Canadian cities right now (but certainly not all), the house price versus rent ratio and the house price versus income ratio are at or near their all-time highs. This suggests that, overwhelmingly, it makes better financial sense to rent in these markets and invest your equity elsewhere.
There is no free equity
Building equity is undeniably a wise financial move. The mistake many people make is equating equity with a mortgage. A mortgage doesn't give you equity; equity is only as much as you pay. A down payment is equity. Anything you pay toward the principle of your mortgage is equity. Paying interest to the bank is as useful to your financial situation as paying rent to your landlord.
If you start out with a very small down payment and arrange for a long future of low monthly payments, your ability to build equity before selling your home becomes seriously limited. With less than 15 per cent equity, you may end up merely trading one mortgage for another. If there is a drop in the housing market, the value of your home could fall to the point that if you were to sell it, you would owe more on your mortgage than the actual selling price of the house. Once it's sold, you'd have to write the bank a cheque to make up for the difference. This is called a 'negative equity' situation and while it's a worst case, it happens more often than you might realize.
Renting space or renting money?
Most likely, everyone from your father to your banker has drilled the idea into your head that renting is a waste of money and buying a home is the only prudent way to build equity. According to Rabidoux, this is not always the case, especially in markets that are currently overvalued and highly vulnerable to a real estate crash, such as Vancouver, Victoria and the Toronto condo market.
"There is a very unfortunate stigma attached to renting," Rabidoux says. "This is dangerous and damaging to many people's finances. The reality is that the majority of new home 'owners' are still renters; they've just gone from renting space to renting money." With rents in large cities exceptionally cheap compared to owning, home ownership becomes a very steep tax on those unwilling to crunch the numbers or who give into the societal pressure to buy. Don't be that girl!
Comparing the costs
Rabidoux suggests wannabe-homeowners start by figuring out the monthly costs of owning a home. Calculate the mortgage principal and interest, taxes, insurance and any additional monthly payments such as condo fees. Also add the often ignored but very necessary maintenance costs — two per cent of the cost of the house per year is a good rule of thumb — then divide by 12 to get a monthly cost.
Next, figure out what it would cost you to rent a similar property in the area. Kijiji and online classifieds are a good place to start. Realtors can also help with rent statistics. Remember that rent is often negotiable, particularly if you don't have pets or kids, if you do have a stable job, are a non-smoker and have good references. Landlords often give steep discounts to 'good tenants' they believe will care for their property.
Most importantly, consider the lost opportunity cost of your down payment: what you could be earning by investing your equity in something other than real estate. With stocks or bonds, for example, you can earn a minimum of three to four per cent with a very conservative, low-risk investment. If you have a $20,000 down payment, that means you are foregoing at least $600-$800 a year that this money could be earning you.
You may be tempted to think that you can easily earn that kind of return on the value of a home, as house prices climb to teetering levels and buyers engage in wild bidding wars for the luxury of overleveraging themselves to buy their dream home. Yet, the definition of a housing 'bubble' is an unreal, overly inflated market where people expect prices to rise forever. Depending on the market where you live, you must consider the risk of when the bubble may burst and how you might safely build equity elsewhere. This needs to be factored into the 'true' cost of ownership.
Save the difference
If you find a substantial cost difference between owning and renting and choose to rent, you have a great opportunity to have the best of both worlds — rent the place you want and bank the difference. Of course, there is no financial benefit if you end up using the cost savings to splash out every month on Frette linens, Fall & Barrow paint and a fabulous home theatre system. The wise renter is disciplined enough to invest her monthly cost savings and therefore build that equity that everyone has told you can only come from home ownership.
The long-term view
If you plan to buy a home and live in it for many years or even decades, you will likely ride out numerous market fluctuations, will be more likely to sell at a profit and less likely to find yourself in a negative equity situation. As for Marky Mark, he's probably not in it for the profit; he has his movies for that. We do hope, however, that his foray into Canadian real estate means that he and his "Good Vibrations" will be here for a very long time.
Golden Girl Finance, On Thursday August 11, 2011, 10:00 am EDT
Donnie Wahlberg may have been a New Kid on The Block, but his cutie-boy brother Mark Wahlberg, (Marky Mark to those who remember the 90s) has become a new kid on a block in Toronto…in the form of a $12 million penthouse condo. The posh bachelor pad is close to Wahlberg's usual digs at The Hazelton Hotel, where rooms run between $500 to $2400 a night. Given that the star of Boogie Nights, The Fighter and former leader of hip-hop group The Funky Bunch spends an increasing amount of time filming movies in the city and hanging out at the Toronto International Film Festival, it seems he's decided to quit forking over money in hotel room rentals and instead buy his own place.
Wahlberg probably has the advantage of owning his new condo outright, giving him full equity ownership. For the rest of us mortgage-carrying mortals, however, now is not an ideal time to be investing in a condo in Toronto. According to Ben Rabidoux, financial adviser, real estate expert and author of the website The Economic Analyst (www.TheEconomicAnalyst.com), in most Canadian cities right now (but certainly not all), the house price versus rent ratio and the house price versus income ratio are at or near their all-time highs. This suggests that, overwhelmingly, it makes better financial sense to rent in these markets and invest your equity elsewhere.
There is no free equity
Building equity is undeniably a wise financial move. The mistake many people make is equating equity with a mortgage. A mortgage doesn't give you equity; equity is only as much as you pay. A down payment is equity. Anything you pay toward the principle of your mortgage is equity. Paying interest to the bank is as useful to your financial situation as paying rent to your landlord.
If you start out with a very small down payment and arrange for a long future of low monthly payments, your ability to build equity before selling your home becomes seriously limited. With less than 15 per cent equity, you may end up merely trading one mortgage for another. If there is a drop in the housing market, the value of your home could fall to the point that if you were to sell it, you would owe more on your mortgage than the actual selling price of the house. Once it's sold, you'd have to write the bank a cheque to make up for the difference. This is called a 'negative equity' situation and while it's a worst case, it happens more often than you might realize.
Renting space or renting money?
Most likely, everyone from your father to your banker has drilled the idea into your head that renting is a waste of money and buying a home is the only prudent way to build equity. According to Rabidoux, this is not always the case, especially in markets that are currently overvalued and highly vulnerable to a real estate crash, such as Vancouver, Victoria and the Toronto condo market.
"There is a very unfortunate stigma attached to renting," Rabidoux says. "This is dangerous and damaging to many people's finances. The reality is that the majority of new home 'owners' are still renters; they've just gone from renting space to renting money." With rents in large cities exceptionally cheap compared to owning, home ownership becomes a very steep tax on those unwilling to crunch the numbers or who give into the societal pressure to buy. Don't be that girl!
Comparing the costs
Rabidoux suggests wannabe-homeowners start by figuring out the monthly costs of owning a home. Calculate the mortgage principal and interest, taxes, insurance and any additional monthly payments such as condo fees. Also add the often ignored but very necessary maintenance costs — two per cent of the cost of the house per year is a good rule of thumb — then divide by 12 to get a monthly cost.
Next, figure out what it would cost you to rent a similar property in the area. Kijiji and online classifieds are a good place to start. Realtors can also help with rent statistics. Remember that rent is often negotiable, particularly if you don't have pets or kids, if you do have a stable job, are a non-smoker and have good references. Landlords often give steep discounts to 'good tenants' they believe will care for their property.
Most importantly, consider the lost opportunity cost of your down payment: what you could be earning by investing your equity in something other than real estate. With stocks or bonds, for example, you can earn a minimum of three to four per cent with a very conservative, low-risk investment. If you have a $20,000 down payment, that means you are foregoing at least $600-$800 a year that this money could be earning you.
You may be tempted to think that you can easily earn that kind of return on the value of a home, as house prices climb to teetering levels and buyers engage in wild bidding wars for the luxury of overleveraging themselves to buy their dream home. Yet, the definition of a housing 'bubble' is an unreal, overly inflated market where people expect prices to rise forever. Depending on the market where you live, you must consider the risk of when the bubble may burst and how you might safely build equity elsewhere. This needs to be factored into the 'true' cost of ownership.
Save the difference
If you find a substantial cost difference between owning and renting and choose to rent, you have a great opportunity to have the best of both worlds — rent the place you want and bank the difference. Of course, there is no financial benefit if you end up using the cost savings to splash out every month on Frette linens, Fall & Barrow paint and a fabulous home theatre system. The wise renter is disciplined enough to invest her monthly cost savings and therefore build that equity that everyone has told you can only come from home ownership.
The long-term view
If you plan to buy a home and live in it for many years or even decades, you will likely ride out numerous market fluctuations, will be more likely to sell at a profit and less likely to find yourself in a negative equity situation. As for Marky Mark, he's probably not in it for the profit; he has his movies for that. We do hope, however, that his foray into Canadian real estate means that he and his "Good Vibrations" will be here for a very long time.
Wednesday, August 10, 2011
Housing could get boost from market chaos
The upside in a global stock market rout may ironically be a healthier housing market – at least in the short term, say economists.
“The housing market has nine lives. Every time interest rates are supposed to go down, something happens and it helps to keep the market going,” said Benjamin Tal, senior economist at CIBC World Markets.
Interest rates were supposed to be headed up before the crisis of terrorist attacks in New York on 9/11, and the last crash in 2008. But that didn’t happen. And it looks like rates will be staying down for a while, says Tal.
The market is already betting that Bank of Canada Governor Mark Carney’s plans to hike interest rates as soon as September will have to be put off until the end of next year.
South of the border, the Federal Reserve said Tuesday that it expects “exceptionally low levels of the federal funds rate at least through mid-2013.”
And ironically, while the U.S. has experienced a downgrade in its credit rating from Standard & Poors, investors have continued to pile into the Treasuries market.
The U.S. dollar remains the global reserve currency as investors head for shelter as they find few safe haven options out there.
The demand for treasuries means that yields have gone even lower. Which means there is downward pressure on longer-term interest rates. Long-fixed term rates are affected by a variety of factors such as competition for funds in financial markets and to prices in the bond market. Short-term rates are more affected by the key overnight central bank rate.
“The interest rate environment will continue to be very attractive for homebuyers for both short term and longer term borrowing costs. With the safety of U.S. bonds that’s keeping longer term rates low,” said Scotiabank economist Adrienne Warren.
Industry groups are warning, meanwhile, that during an already tough recovery, any sudden move upward in rates could have dire consequences on real estate sales.
“The very recent global economic news demonstrates the Bank of Canada needs to consider any future rate hikes with extreme caution, as the recovery may be more fragile than believed,” said Ontario Home Builders’ Association President Bob Finnigan.
Some investors may also be looking at real estate assets for a place to park their money because of the volatile stock market, said Tal.
Lance Dore, a member of the U.S.-based Royal Institution of Chartered Surveyors, says investment in real estate may be a beneficiary from those looking for safe haven.
“The sell-off of stocks is a clear signal that people are not confident in the future and want safety now. What has also happened in the past declines in the stock market is a flight to quality,” said Dore. “Real estate tends to be the recipient as part of this flight. Real estate values are at all-time lows with returns at all-time highs. The convergence of excess cash due to stock sell-off and corporations flush with cash for investment will push these excess funds into the inevitable diversification to real estate.”
While the future for the stock market looks shaky, the real estate sector is improving due to improving fundamentals based on increasing rents, absorption of distressed supply and increased interest for diversification, said Dore.
However, if the stock market continues on a downward path, housing will not escape unscathed. While lower interest rates are a huge mitigating factor, the losses on the market may eventually translate into job losses.
For one thing, it takes confidence to plunk down that down payment for a home. It usually means that you’ve got a job, some savings, and hope for the future.
But confidence is not in abundance in global stock markets this week as concerns over sovereign debt have panicked investors. Without confidence, the housing market – the biggest ticket item on the consumer checklist will suffer no matter how low rates go, say economists.
In the United States, where more than a quarter of borrowers have negative equity – meaning they owe more than their homes are worth – this could mean another setback for the already beleaguered market.
In Canada, where markets have been stable, and have been forecast to cool down next year, this could mean that sales and valuations may come down to earth quicker than expected.
“Assuming the volatility and uncertainty continues in the markets it will have negative implications for both potential home buyers and for builders,” said Scotiabank economist Warren. “There is still a big difference between Canada and the U.S. But it certainly reinforces our view that growth in Canada and internationally will be on the soft side.”
So far, economists have not changed their outlook on the Canadian housing market. Most expect the market to flatline or correct slightly by next year. But that could change if the rout continues.
“If this is the precipitation of a larger more protracted slowdown for the economy it will certainly affect housing,” said Peter Norman, chief economist real estate consultancy Altus Group.” If we get into a soft patch with slower employment growth then we will see slower home sales. For investors who are speculating on future events this adds another layer of uncertainty in the market. So this would cause them to sit on the sidelines.”
In separate reports on Tuesday, Canadian housing starts surprised by rising unexpectedly in July, climbing to a 15 month high, up 4.3 per cent to 205,100 units according to the Canada Mortgage and Housing Corporation. And U.S. home values actually had the smallest drop in four years in the second quarter according to figures released by Zillow Inc.
But this was before the impact of the stock market drop which will affect confidence as consumers suffer from a declining wealth effect. During a recession, the high end of the market, of purely discretionary purchases such as cottages and luxury condos might be the first to feel the impact. But a lack of confidence will affect all sectors of the market.
“We continue to hold that new home construction will start to cool in the second half of the year, but this may come more slowly than anticipated as rates remain low for longer,” said Arlene Kish, principal economist for IHS Global Insight. “On the other hand, if the recent slide in financial markets remains persistent, consumers will become less optimistic and will likely stay away from home purchases.”
“The housing market has nine lives. Every time interest rates are supposed to go down, something happens and it helps to keep the market going,” said Benjamin Tal, senior economist at CIBC World Markets.
Interest rates were supposed to be headed up before the crisis of terrorist attacks in New York on 9/11, and the last crash in 2008. But that didn’t happen. And it looks like rates will be staying down for a while, says Tal.
The market is already betting that Bank of Canada Governor Mark Carney’s plans to hike interest rates as soon as September will have to be put off until the end of next year.
South of the border, the Federal Reserve said Tuesday that it expects “exceptionally low levels of the federal funds rate at least through mid-2013.”
And ironically, while the U.S. has experienced a downgrade in its credit rating from Standard & Poors, investors have continued to pile into the Treasuries market.
The U.S. dollar remains the global reserve currency as investors head for shelter as they find few safe haven options out there.
The demand for treasuries means that yields have gone even lower. Which means there is downward pressure on longer-term interest rates. Long-fixed term rates are affected by a variety of factors such as competition for funds in financial markets and to prices in the bond market. Short-term rates are more affected by the key overnight central bank rate.
“The interest rate environment will continue to be very attractive for homebuyers for both short term and longer term borrowing costs. With the safety of U.S. bonds that’s keeping longer term rates low,” said Scotiabank economist Adrienne Warren.
Industry groups are warning, meanwhile, that during an already tough recovery, any sudden move upward in rates could have dire consequences on real estate sales.
“The very recent global economic news demonstrates the Bank of Canada needs to consider any future rate hikes with extreme caution, as the recovery may be more fragile than believed,” said Ontario Home Builders’ Association President Bob Finnigan.
Some investors may also be looking at real estate assets for a place to park their money because of the volatile stock market, said Tal.
Lance Dore, a member of the U.S.-based Royal Institution of Chartered Surveyors, says investment in real estate may be a beneficiary from those looking for safe haven.
“The sell-off of stocks is a clear signal that people are not confident in the future and want safety now. What has also happened in the past declines in the stock market is a flight to quality,” said Dore. “Real estate tends to be the recipient as part of this flight. Real estate values are at all-time lows with returns at all-time highs. The convergence of excess cash due to stock sell-off and corporations flush with cash for investment will push these excess funds into the inevitable diversification to real estate.”
While the future for the stock market looks shaky, the real estate sector is improving due to improving fundamentals based on increasing rents, absorption of distressed supply and increased interest for diversification, said Dore.
However, if the stock market continues on a downward path, housing will not escape unscathed. While lower interest rates are a huge mitigating factor, the losses on the market may eventually translate into job losses.
For one thing, it takes confidence to plunk down that down payment for a home. It usually means that you’ve got a job, some savings, and hope for the future.
But confidence is not in abundance in global stock markets this week as concerns over sovereign debt have panicked investors. Without confidence, the housing market – the biggest ticket item on the consumer checklist will suffer no matter how low rates go, say economists.
In the United States, where more than a quarter of borrowers have negative equity – meaning they owe more than their homes are worth – this could mean another setback for the already beleaguered market.
In Canada, where markets have been stable, and have been forecast to cool down next year, this could mean that sales and valuations may come down to earth quicker than expected.
“Assuming the volatility and uncertainty continues in the markets it will have negative implications for both potential home buyers and for builders,” said Scotiabank economist Warren. “There is still a big difference between Canada and the U.S. But it certainly reinforces our view that growth in Canada and internationally will be on the soft side.”
So far, economists have not changed their outlook on the Canadian housing market. Most expect the market to flatline or correct slightly by next year. But that could change if the rout continues.
“If this is the precipitation of a larger more protracted slowdown for the economy it will certainly affect housing,” said Peter Norman, chief economist real estate consultancy Altus Group.” If we get into a soft patch with slower employment growth then we will see slower home sales. For investors who are speculating on future events this adds another layer of uncertainty in the market. So this would cause them to sit on the sidelines.”
In separate reports on Tuesday, Canadian housing starts surprised by rising unexpectedly in July, climbing to a 15 month high, up 4.3 per cent to 205,100 units according to the Canada Mortgage and Housing Corporation. And U.S. home values actually had the smallest drop in four years in the second quarter according to figures released by Zillow Inc.
But this was before the impact of the stock market drop which will affect confidence as consumers suffer from a declining wealth effect. During a recession, the high end of the market, of purely discretionary purchases such as cottages and luxury condos might be the first to feel the impact. But a lack of confidence will affect all sectors of the market.
“We continue to hold that new home construction will start to cool in the second half of the year, but this may come more slowly than anticipated as rates remain low for longer,” said Arlene Kish, principal economist for IHS Global Insight. “On the other hand, if the recent slide in financial markets remains persistent, consumers will become less optimistic and will likely stay away from home purchases.”
Tuesday, August 9, 2011
v
Harper urges calm as stock markets tumble on financial woes
BRASILIA - Don’t panic.
That was Stephen Harper’s message today as the Toronto stock market plunged to its lowest point in almost a year on the first day of trading after the United States had its credit rating bumped down a tier.
“To date, this doesn’t change our overall assessment,” the prime minister said during a visit to the Brazilian capital.
“Notwithstanding the fragility of the economy and the headwinds that are there, we believe that a gradual recovery can continue. Our policies have been achieving that in Canada.”
The Toronto Stock Exchange and Wall Street’s main market both fell 300 points in afternoon trading, while the price of gold soared as investors looked for shelter in a rout sparked by the historic downgrading by Standard & Poor’s.
At a signing ceremony with Harper for several modest bilateral deals, Brazilian President Dilma Rousseff criticized the credit-rating agency for an “incorrect assessment.”
“We do not agree with the rushed evaluation, a little bit too quick evaluation, and I would even say incorrect assessment made by Standard & Poor’s which reduced the credit rating of the United States.”
The Prime Minister’s Office later clarified that Rousseff was speaking on behalf of Brazil, not Canada.
Harper opened a four-country tour of Latin America by announcing agreements with Brazil on air transport, social security, Olympic co-operation and international development aid effectiveness.
Harper and Rousseff also announced a business leaders’ forum that would see Canadian and Brazilian executives meet on the margins of high-level diplomatic talks.
“Brazil is a major global economic player and a key priority market for Canada,” Harper said in a press release.
“These agreements will benefit both countries by promoting greater two-way flow of people, goods and services, enhancing our competitiveness and further strengthening our partnership in key areas of shared interest.”
Canada is seeking bilateral free trade deals with a number of countries, placing a special emphasis on the countries of Latin America and the Caribbean.
The Conservative government is eager to make inroads with Brazil in particular, the world’s seventh-largest economy and expected to rise to No. 5 within a few years.
But doing a deal with Brazil is tricky. Brazil needs the consent of Argentina, Paraguay and Uruguay — members of a common South American economic bloc called Mercosur — to enter into such an agreement.
Harper said Canada has begun exploratory talks with Mercosur on a free-trade deal.
Harper’s trip takes him to Brazil, Colombia, Costa Rica and Honduras.
BRASILIA - Don’t panic.
That was Stephen Harper’s message today as the Toronto stock market plunged to its lowest point in almost a year on the first day of trading after the United States had its credit rating bumped down a tier.
“To date, this doesn’t change our overall assessment,” the prime minister said during a visit to the Brazilian capital.
“Notwithstanding the fragility of the economy and the headwinds that are there, we believe that a gradual recovery can continue. Our policies have been achieving that in Canada.”
The Toronto Stock Exchange and Wall Street’s main market both fell 300 points in afternoon trading, while the price of gold soared as investors looked for shelter in a rout sparked by the historic downgrading by Standard & Poor’s.
At a signing ceremony with Harper for several modest bilateral deals, Brazilian President Dilma Rousseff criticized the credit-rating agency for an “incorrect assessment.”
“We do not agree with the rushed evaluation, a little bit too quick evaluation, and I would even say incorrect assessment made by Standard & Poor’s which reduced the credit rating of the United States.”
The Prime Minister’s Office later clarified that Rousseff was speaking on behalf of Brazil, not Canada.
Harper opened a four-country tour of Latin America by announcing agreements with Brazil on air transport, social security, Olympic co-operation and international development aid effectiveness.
Harper and Rousseff also announced a business leaders’ forum that would see Canadian and Brazilian executives meet on the margins of high-level diplomatic talks.
“Brazil is a major global economic player and a key priority market for Canada,” Harper said in a press release.
“These agreements will benefit both countries by promoting greater two-way flow of people, goods and services, enhancing our competitiveness and further strengthening our partnership in key areas of shared interest.”
Canada is seeking bilateral free trade deals with a number of countries, placing a special emphasis on the countries of Latin America and the Caribbean.
The Conservative government is eager to make inroads with Brazil in particular, the world’s seventh-largest economy and expected to rise to No. 5 within a few years.
But doing a deal with Brazil is tricky. Brazil needs the consent of Argentina, Paraguay and Uruguay — members of a common South American economic bloc called Mercosur — to enter into such an agreement.
Harper said Canada has begun exploratory talks with Mercosur on a free-trade deal.
Harper’s trip takes him to Brazil, Colombia, Costa Rica and Honduras.
Monday, August 8, 2011
U.S. will take a long time to dig out of this hole
By David Olive Business Columnist
How to put this politely? While not a deadbeat, the U.S. is no longer among the world’s most creditworthy nations. America now has a lower credit rating than Liechtenstein. And the Toronto-Dominion Bank.
Mind you, that’s a matter of opinion.
On Friday, U.S. credit rating agency Standard & Poor’s for the first time in 70 years stripped the world’s largest economy of its top, triple-A rating on America’s $14.3 trillion in government debt. S&P dropped its rating a notch, to AA-plus.
But the two other members of the U.S. ratings oligopoly, Moody’s Investors Service and Fitch Ratings, earlier in the week reconfirmed their top rating on U.S. debt.
Just 16 of the 126 nations whose debt is rated by S&P earn its coveted triple-A rating, Canada among them.
For S&P, last week’s panicky, acrimonious budget-cutting deal that narrowly averted a first-ever default by Washington was a factor in its U.S. debt downgrade.
“(S&P’s) conclusion was pretty much motivated by all of the debate about the raising of the debt ceiling,” John Chambers, chairman of S&P’s sovereign ratings committee, told The Wall Street Journal Friday.
“It involved a level of brinkmanship greater than what we had expected.”
A furious Obama administration pleaded with S&P to hold off on its announcement for a few weeks of further assessment, arguing that such a historic decision should be free of political considerations. But S&P was having none of that.
In S&P’s view, the intransigence of hard-right U.S. deficit hawks, notably the so-called Tea Partiers, is highly relevant in determining a nation’s ability or willingness to honour its debt obligations.
“The kind of debate we’ve seen over the debt ceiling has made us think the United States is no longer in the top echelon on its political settings.” That’s Chambers’ gentle way of saying that America’s political class can no longer be relied upon to expertly manage the nation’s finances.
China’s central banker, Zhou Xiaochuan, was a little blunter, depicting the Americans as a threat to the world economy. “Big fluctuations and uncertainty in the U.S. Treasury market will influence the stability of international monetary and financial systems, thus hurting the global economic recovery,” the chief of the People’s Bank of China said last week.
China, the world’s largest creditor nation, holds about $2 trillion worth of U.S.-denominated securities.
For years, the U.S. has been hectoring Beijing on everything from its allegedly overvalued currency to human rights abuses to intellectual property theft.
You can sense Zhou relishing this moment to return fire: “We hope that the U.S. government and the Congress will take concrete and responsible policy measures . . . to properly deal with its debt issues, so as to ensure smooth operation of the Treasury market and investor safety.”
Stop playing with matches, is Beijing’s humiliating admonition to the U.S. And really, there’s no snappy comeback to that, although the state Xinhua News Agency was piling it on in labelling the recent Washington budget debate a “madcap farce” (we know, we know) and U.S. debt a “ticking bomb.”
Typically, a lower debt rating means steeper borrowing costs, for consumers, business and government. Debt issuers must offer a higher rate of interest to attract buyers of higher-risk securities.
But hold on.
As noted, S&P is an “outlier” in banishing the U.S. from the triple-A club. Also, the U.S. owes most of its debt to itself. Less than one-third of U.S. government debt is held by foreigners, while most of crisis-stricken Greece’s debt is owed to offshore lenders. And U.S. Treasurys are still unmatched as a safe store of value for investors worldwide.
Yet for many economic observers, S&P’s move is overdue.
Across a range of factors — including anemic GDP growth, still-declining house values, a 9.1 per cent jobless rate, stagnant middle-class incomes and recent inflation in food, gasoline and apparel prices — the U.S. economy has been underperforming for years. Layering unmanageable debt atop that plethora of sickly leading indicators made a U.S. debt downgrade inevitable.
Felix Salmon, the top economics analyst who blogs at Reuters, expects the U.S. has lost its triple-A rating forever. “If we came that close to defaulting,” Salmon writes, “there’s no way that our securities can be risk-free.” The downgrade, he says, is “merely a late-to-the-party recognition of that fact.”
I don’t know about forever. But it will take a lot of convincing for S&P to restore America’s membership in the triple-A fraternity. We should know. S&P downgraded Canada in 1992, when we seemed blasé about a record $43 billion deficit.
Not until Canada was well into its 11-year run of consecutive budget surpluses — unmatched by any G8 nation — did S&P deign to restore our triple-A status, in 2002.
Elapsed time: nine years and nine months.
How to put this politely? While not a deadbeat, the U.S. is no longer among the world’s most creditworthy nations. America now has a lower credit rating than Liechtenstein. And the Toronto-Dominion Bank.
Mind you, that’s a matter of opinion.
On Friday, U.S. credit rating agency Standard & Poor’s for the first time in 70 years stripped the world’s largest economy of its top, triple-A rating on America’s $14.3 trillion in government debt. S&P dropped its rating a notch, to AA-plus.
But the two other members of the U.S. ratings oligopoly, Moody’s Investors Service and Fitch Ratings, earlier in the week reconfirmed their top rating on U.S. debt.
Just 16 of the 126 nations whose debt is rated by S&P earn its coveted triple-A rating, Canada among them.
For S&P, last week’s panicky, acrimonious budget-cutting deal that narrowly averted a first-ever default by Washington was a factor in its U.S. debt downgrade.
“(S&P’s) conclusion was pretty much motivated by all of the debate about the raising of the debt ceiling,” John Chambers, chairman of S&P’s sovereign ratings committee, told The Wall Street Journal Friday.
“It involved a level of brinkmanship greater than what we had expected.”
A furious Obama administration pleaded with S&P to hold off on its announcement for a few weeks of further assessment, arguing that such a historic decision should be free of political considerations. But S&P was having none of that.
In S&P’s view, the intransigence of hard-right U.S. deficit hawks, notably the so-called Tea Partiers, is highly relevant in determining a nation’s ability or willingness to honour its debt obligations.
“The kind of debate we’ve seen over the debt ceiling has made us think the United States is no longer in the top echelon on its political settings.” That’s Chambers’ gentle way of saying that America’s political class can no longer be relied upon to expertly manage the nation’s finances.
China’s central banker, Zhou Xiaochuan, was a little blunter, depicting the Americans as a threat to the world economy. “Big fluctuations and uncertainty in the U.S. Treasury market will influence the stability of international monetary and financial systems, thus hurting the global economic recovery,” the chief of the People’s Bank of China said last week.
China, the world’s largest creditor nation, holds about $2 trillion worth of U.S.-denominated securities.
For years, the U.S. has been hectoring Beijing on everything from its allegedly overvalued currency to human rights abuses to intellectual property theft.
You can sense Zhou relishing this moment to return fire: “We hope that the U.S. government and the Congress will take concrete and responsible policy measures . . . to properly deal with its debt issues, so as to ensure smooth operation of the Treasury market and investor safety.”
Stop playing with matches, is Beijing’s humiliating admonition to the U.S. And really, there’s no snappy comeback to that, although the state Xinhua News Agency was piling it on in labelling the recent Washington budget debate a “madcap farce” (we know, we know) and U.S. debt a “ticking bomb.”
Typically, a lower debt rating means steeper borrowing costs, for consumers, business and government. Debt issuers must offer a higher rate of interest to attract buyers of higher-risk securities.
But hold on.
As noted, S&P is an “outlier” in banishing the U.S. from the triple-A club. Also, the U.S. owes most of its debt to itself. Less than one-third of U.S. government debt is held by foreigners, while most of crisis-stricken Greece’s debt is owed to offshore lenders. And U.S. Treasurys are still unmatched as a safe store of value for investors worldwide.
Yet for many economic observers, S&P’s move is overdue.
Across a range of factors — including anemic GDP growth, still-declining house values, a 9.1 per cent jobless rate, stagnant middle-class incomes and recent inflation in food, gasoline and apparel prices — the U.S. economy has been underperforming for years. Layering unmanageable debt atop that plethora of sickly leading indicators made a U.S. debt downgrade inevitable.
Felix Salmon, the top economics analyst who blogs at Reuters, expects the U.S. has lost its triple-A rating forever. “If we came that close to defaulting,” Salmon writes, “there’s no way that our securities can be risk-free.” The downgrade, he says, is “merely a late-to-the-party recognition of that fact.”
I don’t know about forever. But it will take a lot of convincing for S&P to restore America’s membership in the triple-A fraternity. We should know. S&P downgraded Canada in 1992, when we seemed blasé about a record $43 billion deficit.
Not until Canada was well into its 11-year run of consecutive budget surpluses — unmatched by any G8 nation — did S&P deign to restore our triple-A status, in 2002.
Elapsed time: nine years and nine months.
Saturday, August 6, 2011
World markets bleed
See what can happen when you "Call wolf". The USA election politics took precedent over realty. In the end USA was going to print money like they always do and survive another day. If the election was not in swing this bill would have passe quickly and quietly. If the rest of the world were not in such turmoil this stance could have hurt the USA and investors a lot more. Sometimes we just have to grow up and face reality and act in favor of the majority. I guess we pay pay those politicians too much.
Neil "Mortgage Man" McJannet
7:09 PM ET | Last Updated: Aug 4, 2011 7:13 PM ET
Investors are losing faith in the global economy and the policymakers in charge of keeping it afloat, putting the two and a half-year bull market in serious jeopardy.
Stock markets around the world plummeted their most since the financial crisis on Thursday, as escalating U.S. recession fears and Europe’s ballooning sovereign debt crisis were further exacerbated by an emergency intervention of the Japanese yen.
“It’s getting more and more difficult to see the glass half full,” says Serge Pepin, head of investments at BMO Investments Inc. “I’ve always been sort of an optimist if anything, but it is definitely not a rosy picture.”
The S&P/TSX composite index, Canada’s key equity benchmark, suffered its biggest drop since June 2009, by falling 435.90 points or 3.4% to close at 12,380.13. It was the eighth time in the past nine sessions that the market has tumbled.South of the border, the Dow Jones Industrial Average dropped 512.76 points or 4.31% to 11,383.68. It was the Dow’s worst point drop since December 2008. With each market now down 13% and 11% respectively since their most recent peaks in April, stocks have dropped well below the 10% pullback that marks an official correction.
Mr. Pepin said investors are starting to question whether the bull run that began on March 9, 2009 has finally come to an end.
“We are now more than 20% off the market’s all-time high in 2007, so by some people’s definition, we’re already in a new bear market,” he said. “If we can get a clear signal from the U.S. economy that things are moving to the positive, that’s when people will get some solace. At this point we just aren’t seeing that.”
In this type of environment, it makes sense that investors are selling some of their riskier assets including cyclical stocks and commodities, in favour of so-called safe haven investments, such as bonds, defensive equities like consumer staples and healthcare, and gold, which briefly hit another record high at US$1,684.90 an ounce on Thursday.
That said, Mr. Pepin thinks it’s premature to compare the market’s recent malaise with the extreme meltdown that occurred in 2008 at the height of the financial crisis.
“I think this is strictly sentiment and we are getting close to a bottom, ” he said. “I don’t believe we are headed for recession and corporate earnings are still very strong. That has to matter for investors.”
Just how much futher markets will fall could hinge on Friday’s crucial U.S. jobs report for July. If figures are better than estimates calling for an increase of 85,000 in non-farm payrolls and an unchanged unemployment rate at 9.2%, then a relief rally could take place. If the opposite transpires, the sell-off will likely only get worse, as the risk of a U.S. recession moves closer to reality.
“The economy is only one shock away from falling into recession,” said Michelle Meyer, an economist at Bank of America Merrill Lynch, in a note to clients Thursday.
Ms. Meyer believes there is now a 35% chance of a U.S. recession in the next year, about double what her odds were this spring.
With this week’s new debt deal in place, there is no appetite in Washington to provide more fiscal stimulus in aid of the slumping recovery, she said. At the same time, the Federal Reserve, which has left interest rates at near zero for nearly three years, may not have enough ammunition left to prevent another contraction.
On the one hand, investors are in a state of confusion and alarm, not knowing if the world’s problems can be resolved, said Andrew Pyle, a financial advisor at ScotiaMcLeod. On the other hand, panic is often the mother of all innovation.
“The [market slide] is creating the same pro-growth elements as we’ve seen before, such as lower energy prices and interest rates,” he said. “This doesn’t mean we jump and start loading up on equities, but as Warren Buffett says the best time to buy is when there’s blood in the streets.”
Neil "Mortgage Man" McJannet
7:09 PM ET | Last Updated: Aug 4, 2011 7:13 PM ET
Investors are losing faith in the global economy and the policymakers in charge of keeping it afloat, putting the two and a half-year bull market in serious jeopardy.
Stock markets around the world plummeted their most since the financial crisis on Thursday, as escalating U.S. recession fears and Europe’s ballooning sovereign debt crisis were further exacerbated by an emergency intervention of the Japanese yen.
“It’s getting more and more difficult to see the glass half full,” says Serge Pepin, head of investments at BMO Investments Inc. “I’ve always been sort of an optimist if anything, but it is definitely not a rosy picture.”
The S&P/TSX composite index, Canada’s key equity benchmark, suffered its biggest drop since June 2009, by falling 435.90 points or 3.4% to close at 12,380.13. It was the eighth time in the past nine sessions that the market has tumbled.South of the border, the Dow Jones Industrial Average dropped 512.76 points or 4.31% to 11,383.68. It was the Dow’s worst point drop since December 2008. With each market now down 13% and 11% respectively since their most recent peaks in April, stocks have dropped well below the 10% pullback that marks an official correction.
Mr. Pepin said investors are starting to question whether the bull run that began on March 9, 2009 has finally come to an end.
“We are now more than 20% off the market’s all-time high in 2007, so by some people’s definition, we’re already in a new bear market,” he said. “If we can get a clear signal from the U.S. economy that things are moving to the positive, that’s when people will get some solace. At this point we just aren’t seeing that.”
In this type of environment, it makes sense that investors are selling some of their riskier assets including cyclical stocks and commodities, in favour of so-called safe haven investments, such as bonds, defensive equities like consumer staples and healthcare, and gold, which briefly hit another record high at US$1,684.90 an ounce on Thursday.
That said, Mr. Pepin thinks it’s premature to compare the market’s recent malaise with the extreme meltdown that occurred in 2008 at the height of the financial crisis.
“I think this is strictly sentiment and we are getting close to a bottom, ” he said. “I don’t believe we are headed for recession and corporate earnings are still very strong. That has to matter for investors.”
Just how much futher markets will fall could hinge on Friday’s crucial U.S. jobs report for July. If figures are better than estimates calling for an increase of 85,000 in non-farm payrolls and an unchanged unemployment rate at 9.2%, then a relief rally could take place. If the opposite transpires, the sell-off will likely only get worse, as the risk of a U.S. recession moves closer to reality.
“The economy is only one shock away from falling into recession,” said Michelle Meyer, an economist at Bank of America Merrill Lynch, in a note to clients Thursday.
Ms. Meyer believes there is now a 35% chance of a U.S. recession in the next year, about double what her odds were this spring.
With this week’s new debt deal in place, there is no appetite in Washington to provide more fiscal stimulus in aid of the slumping recovery, she said. At the same time, the Federal Reserve, which has left interest rates at near zero for nearly three years, may not have enough ammunition left to prevent another contraction.
On the one hand, investors are in a state of confusion and alarm, not knowing if the world’s problems can be resolved, said Andrew Pyle, a financial advisor at ScotiaMcLeod. On the other hand, panic is often the mother of all innovation.
“The [market slide] is creating the same pro-growth elements as we’ve seen before, such as lower energy prices and interest rates,” he said. “This doesn’t mean we jump and start loading up on equities, but as Warren Buffett says the best time to buy is when there’s blood in the streets.”
Thursday, August 4, 2011
steve ladurantaye
From Thursday's Globe and Mail
House prices pulled back for the first time this year in Canada’s hottest housing market in the clearest sign yet the buying frenzy is slowing after blistering price gains over the past two years.
Since the global recession clobbered real estate values in many cities around the world a few years ago, the amounts that buyers have been paying for houses in Vancouver have skyrocketed. Vancouver’s recovery has far outstripped that of other Canadian cities, with prices jumping 21 per cent in the past year alone – more than double the gains seen in the rest of the country.
But the latest home-sales figures point to a slowdown. The number sold dropped 21 per cent in July from June, and prices edged 0.1 per cent lower to $630,251 for a typical detached house, according to the Real Estate Board of Greater Vancouver. Listings of properties for sale in the city are increasing, while bidding wars are becoming less common.
The slowing real estate scene in Vancouver is adding to concerns that the rest of the country’s housing market will cool off as well against a backdrop of global economic uncertainty and gyrating financial markets.
After two years of price gains across the country pushed the average national resale price to a record high of $372,700 in June, buyers are starting to reconsider how much they are willing to spend.
There’s no shortage of worries for prospective home buyers in the current economic climate. Government debt woes have triggered massive financial bailouts of European countries and major spending cuts in the United States, where indicators show the economy has slowed to a crawl. Stock markets have dropped sharply in recent weeks, while a slew of global companies have announced broad job cuts. Many Canadians have taken on heavy debt to buy homes or make other purchases.
“The resale market has just gotten stupid in a lot of places as agents just make up a big number and put it out there,” said Ross McCredie, chief executive officer of Sotheby’s International Realty Canada. “Agents were losing listings because they weren’t willing to overprice, but I think people are starting to remember that price does matter.”
A slowdown in Vancouver’s real estate market doesn’t guarantee the rest of the country will follow suit, since unique factors have driven prices in recent years. With mountains on one side and an ocean on the other, a lack of supply has contributed to price gains. The city also attracts many Asian immigrants, who move their families into new homes so they can go to school or start a new life in Canada.
But softer sales come as other markets across the country show signs of cooling as would-be buyers fret over the state of the global economy and postpone buying until they get a better sense of where interest rates are likely to settle. The possibility of a double-dip recession in the United States is also weighing on consumer confidence around the world.
“We’re seeing an increased amount of attention to what’s happening in the economy,” said Don Lawby, the Vancouver-based chief executive officer of Century 21. “It’s having an effect – if a house is priced right and the person is confident about their job, you can do a deal. But the price has to be right.”
Canada’s housing market rebounded strongly from the recession, but Vancouver’s recovery has been the most dramatic. The average house now costs 11 times average household income, double that of anywhere else in Canada.
And while home prices and sales in many parts of Canada remain strong, signs of slowing activity have emerged. Sales in Calgary were 17 per cent below their 10-year average in July. In Toronto, the real estate board said a shortage of listings is still propping up prices, but more sellers are likely to emerge and cap further gains. In Vancouver, selling agents have started offering larger bonuses to any other agent who brings a buyer to the table. Many economists and real estate companies generally expect prices nationally will remain close to where they are for the next year – give or take 5 per cent.
Still, industry experts worry that low interest rates have encouraged buyers to stretch their budgets to obtain housing. Once rates begin to rise, their payments could balloon and leave them hard-pressed to meet their payments.
Vancouver’s real estate board said that although competitively priced homes are selling, there’s been a drop in multiple offer situations in recent months.
“You’re starting to see more desperation from the sellers because they want to get out at the top,” said Mayur Arora of Oneflatfee.ca in Surrey, B.C. “It’s not all doom and gloom, because some neighbourhoods in Vancouver are still seeing bidding wars. But you are seeing signs that things are definitely changing.”
Sotheby’s Mr. McCredie said the market has slowed several times since the recession ended, but each dip has brought more buyers into the market.
“Things seem to slow down and then they get busy again a few weeks later,” he said. “It’s difficult to know if it’s just the time of year or if something else is going on.”
From Thursday's Globe and Mail
House prices pulled back for the first time this year in Canada’s hottest housing market in the clearest sign yet the buying frenzy is slowing after blistering price gains over the past two years.
Since the global recession clobbered real estate values in many cities around the world a few years ago, the amounts that buyers have been paying for houses in Vancouver have skyrocketed. Vancouver’s recovery has far outstripped that of other Canadian cities, with prices jumping 21 per cent in the past year alone – more than double the gains seen in the rest of the country.
But the latest home-sales figures point to a slowdown. The number sold dropped 21 per cent in July from June, and prices edged 0.1 per cent lower to $630,251 for a typical detached house, according to the Real Estate Board of Greater Vancouver. Listings of properties for sale in the city are increasing, while bidding wars are becoming less common.
The slowing real estate scene in Vancouver is adding to concerns that the rest of the country’s housing market will cool off as well against a backdrop of global economic uncertainty and gyrating financial markets.
After two years of price gains across the country pushed the average national resale price to a record high of $372,700 in June, buyers are starting to reconsider how much they are willing to spend.
There’s no shortage of worries for prospective home buyers in the current economic climate. Government debt woes have triggered massive financial bailouts of European countries and major spending cuts in the United States, where indicators show the economy has slowed to a crawl. Stock markets have dropped sharply in recent weeks, while a slew of global companies have announced broad job cuts. Many Canadians have taken on heavy debt to buy homes or make other purchases.
“The resale market has just gotten stupid in a lot of places as agents just make up a big number and put it out there,” said Ross McCredie, chief executive officer of Sotheby’s International Realty Canada. “Agents were losing listings because they weren’t willing to overprice, but I think people are starting to remember that price does matter.”
A slowdown in Vancouver’s real estate market doesn’t guarantee the rest of the country will follow suit, since unique factors have driven prices in recent years. With mountains on one side and an ocean on the other, a lack of supply has contributed to price gains. The city also attracts many Asian immigrants, who move their families into new homes so they can go to school or start a new life in Canada.
But softer sales come as other markets across the country show signs of cooling as would-be buyers fret over the state of the global economy and postpone buying until they get a better sense of where interest rates are likely to settle. The possibility of a double-dip recession in the United States is also weighing on consumer confidence around the world.
“We’re seeing an increased amount of attention to what’s happening in the economy,” said Don Lawby, the Vancouver-based chief executive officer of Century 21. “It’s having an effect – if a house is priced right and the person is confident about their job, you can do a deal. But the price has to be right.”
Canada’s housing market rebounded strongly from the recession, but Vancouver’s recovery has been the most dramatic. The average house now costs 11 times average household income, double that of anywhere else in Canada.
And while home prices and sales in many parts of Canada remain strong, signs of slowing activity have emerged. Sales in Calgary were 17 per cent below their 10-year average in July. In Toronto, the real estate board said a shortage of listings is still propping up prices, but more sellers are likely to emerge and cap further gains. In Vancouver, selling agents have started offering larger bonuses to any other agent who brings a buyer to the table. Many economists and real estate companies generally expect prices nationally will remain close to where they are for the next year – give or take 5 per cent.
Still, industry experts worry that low interest rates have encouraged buyers to stretch their budgets to obtain housing. Once rates begin to rise, their payments could balloon and leave them hard-pressed to meet their payments.
Vancouver’s real estate board said that although competitively priced homes are selling, there’s been a drop in multiple offer situations in recent months.
“You’re starting to see more desperation from the sellers because they want to get out at the top,” said Mayur Arora of Oneflatfee.ca in Surrey, B.C. “It’s not all doom and gloom, because some neighbourhoods in Vancouver are still seeing bidding wars. But you are seeing signs that things are definitely changing.”
Sotheby’s Mr. McCredie said the market has slowed several times since the recession ended, but each dip has brought more buyers into the market.
“Things seem to slow down and then they get busy again a few weeks later,” he said. “It’s difficult to know if it’s just the time of year or if something else is going on.”
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